Dow Caps Biggest Gain in One Month Amid Draghi’s Pledge

July 26 (Bloomberg) -- The Dow Jones Industrial Average
capped its biggest advance in almost a month after European
Central Bank President Mario Draghi pledged to defend the euro.

3M Co., the maker of Post-It Notes, and Visa Inc., the
world’s largest payments network, rose at least 2 percent amid
better-than-estimated earnings. PulteGroup Inc., the nation’s
largest homebuilder by revenue, surged 18 percent on a jump in
orders. Sprint Nextel Corp. and MetroPCS Communications Inc.
rallied more than 20 percent after their results. Facebook Inc.
fell 9.8 percent at 5:23 p.m. New York time after posting a
narrower profit margin as sales and marketing costs surged.

Seven stocks rose for every three falling on U.S. exchanges
at 4 p.m. New York time. The Standard & Poor’s 500 Index added
1.7 percent to 1,360.02. It fell 2.8 percent over the previous
four days. The Dow gained 211.88 points, or 1.7 percent, to
12,887.93. Volume for exchange-listed stocks in the U.S. was 7.7
billion shares, or 15 percent above the three-month average.

“It is a big deal,” said Liz Ann Sonders, the New York-based chief investment strategist at Charles Schwab Corp., which
has $1.8 trillion in client assets. “The markets have been
looking for a more definitive acknowledgement by key people like
Draghi that they are willing to do what they need to do. We feel
that if they want to save the euro, it would involve true QE,”
she said, referring to bond buying to stimulate the economy.

Global stocks rallied and the euro rose by the most in
almost a month against the dollar after Draghi suggested policy
makers may intervene in bond markets as surging yields in Spain
and Italy threaten the existence of the 17-nation currency bloc.
The ECB mothballed its bond-buying program in March as it pushed
governments to do more to control their deficits.

Earnings Season

All 10 industries in the S&P 500 gained today as earnings
at about 72 percent of the 271 companies in the measure which
have reported second-quarter results exceeded analysts’
projections, according to data compiled by Bloomberg.

The bull market in American equities is intact and the S&P
500 will probably reach 1,380 within the next few months and
rally from there, according to Laszlo Birinyi, president of
research and money-management firm Birinyi Associates Inc. in
Westport, Connecticut. He said concern about second-quarter
earnings are overblown and too many investors are worried about
a “worst-case” outcome for stocks.

“It will be, as it has been, a case of three steps
forward, two backward and trends lasting one day or five
hours,” wrote Birinyi in a note to clients. The former Salomon
Brothers Inc. equity trader, who described his forecast as
“1,380 later this summer, and then higher,” said in the note:
“Despite the frustrations of July with its volatility and
curious price activity, we remain optimistic.”

July’s Loss

Today’s rally trimmed this month’s drop in the S&P 500 to
0.2 percent. The Chicago Board Options Exchange Volatility
Index, which measures the cost of using options as insurance
against declines in the S&P 500, slumped 9.4 percent to 17.53.
Earlier this week, the VIX ended at the highest since June 15
amid concern about a global slowdown and Europe’s debt crisis.

3M rallied 2.1 percent to $90.59. Second-quarter profit
beat estimates as gains in efficiency helped trump a drag from
foreign-exchange rates. 3M had to overcome a stronger dollar
that eroded the value of local-currency sales outside the U.S.

Visa rose 3.7 percent to $126.77. It has benefited from a
consumer shift from cash to electronic payments that shows no
signs of abating, while parrying threats to its business model.

A measure of homebuilders in S&P indexes climbed 6.4
percent. PulteGroup soared 18 percent, the most since 2008, to
$11.86 after the company reported profit that beat analysts’
projections amid a 32 percent jump in orders.

Phone Shares

Better-than-estimated earnings also drove a surge in
telephone shares. The group rose the most among 10 industries in
the S&P 500 today, adding 3 percent.

Sprint Nextel rallied 20 percent, the most since 2009, to
$4.05. Sales at the wireless carrier were bolstered by customers
spending more on data plans. Even so, its contract subscriber
base has shrunk for five years, contributing to 19 straight
quarterly losses.

MetroPCS Communications soared 37 percent, the most since
it went public in 2007, to $8.59. The pay-as-you-go wireless
carrier reported second-quarter earnings that beat estimates
amid a decrease in promotional costs.

Akamai Technologies Inc., which helps businesses deliver
data more quickly over the Internet, soared 24 percent to
$35.04. The company reported profit and revenue that beat
estimates, benefiting from the growth of cloud computing.

Western Digital

Western Digital Corp. jumped 21 percent, the most since
2002, to $39.27. The maker of disk drives and networking
products reported fiscal fourth-quarter sales and profit that
topped analysts’ estimates.

Whole Foods Market Inc. climbed 11 percent, the biggest
gain since February 2011, to $94.10. The largest U.S. natural-goods grocer reported third-quarter profit that rose more than
analysts estimated and boosted its annual earnings forecast as
sales gained at established stores.

The New York Times Co. gained 11 percent to $7.80. The
newspaper publishing company reported a narrower loss in the
second quarter amid a gain in digital subscriptions.

CBS Corp. jumped 4.9 percent to $32.63. The owner of the
most-watched U.S. television network will raise its quarterly
dividend 20 percent to 12 cents and expand a stock buyback
program to as much as $4.7 billion.

Economic Data

Stocks rose even as data showed that a slump in June orders
for equipment signals business investment may cool in the second
half of the year. Jobless claims fell more than forecast last
week, which may have resulted from difficulty adjusting data for
seasonal shutdowns of auto factories.

Facebook fell 8.5 percent today ahead of its results as
Zynga Inc. missed analysts’ second-quarter revenue and profit
estimates. The biggest developer of games played on Facebook’s
social network plunged 37 percent to $3.18 today.

After the close of regular trading, Facebook slumped 9.8
percent to $24.22. Marketing and sales expenses jumped more than
fourfold. Chief Executive Officer Mark Zuckerberg is spending
more to increase the user base, which swelled to 955 million
last quarter, and seeks to attract advertisers.

“Ultimately, Facebook is just an advertising platform, and
so advertisers go where people’s eyeballs are,” said Michael
Pachter, an analyst at Wedbush Securities Inc. Based on the
number of users Facebook has amassed, “they’ve built the third-largest country; it just happens to live on the Internet.”

Starbucks’ Results

Starbucks Corp., the world’s largest coffee-shop chain,
also reported results after the market closed. Third-quarter
profit rose less than analysts estimated amid weak demand in
Europe. The shares lost 10 percent to $47.15 after the close of
regular trading.

Raw material companies had the smallest advance in the S&P
500 among 10 industries today. Dow Chemical Co. slumped 3.6
percent to $29.18. The chemical company reported a bigger drop
in earnings and sales than analysts estimated and said the
outlook for global demand for the rest of the year is “bleak.”

Airline stocks fell, giving a benchmark index its longest
decline in two years, after United Continental Holdings Inc.
posted a quarterly profit that missed analysts’ estimates.
United slid 5.9 percent to $19.20 to pace the Bloomberg U.S.
Airlines Index toward an eighth straight daily drop, the longest
streak since 2010. The index slumped 0.8 percent today.

Education Stocks

The Bloomberg U.S. For-Profit Education Index fell 5.1
percent, to the lowest level since the data started being
compiled in 2005, after ITT Educational Services Inc. and
Strayer Education Inc. said student enrollment declined in the
second quarter. ITT Educational sank 15 percent to $42.78, and
Strayer plunged 12 percent to $79.44.

Boston Scientific Corp. slid 6.8 percent to $4.97. The
second-biggest U.S. heart device-maker fell as sinking demand
for stents and defibrillators led to a fourth consecutive
quarterly sales drop.

Cash America International Inc. dropped 19 percent, the
most since 2005, to $36.69. The world’s largest pawn shop
operator posted results that missed estimates and said third-quarter earnings will be lower than last year.

Anyone buying Apple Inc.’s stock after last quarter’s sales
shortfall at the iPhone maker has history on their side,
according to Gene Munster, a Piper Jaffray Cos. analyst.

Disappointing Revenue

A study shows how Apple performed after four earlier cases
of disappointing quarterly revenue, as tracked by Munster. They
occurred in fiscal 2006, 2007, 2008 and 2011, with iPhone sales
trailing estimates in the latter case. Six months later, the
shares were 23 percent higher on average.

“It’s going to be an in-vogue stock again shortly,”
Munster said yesterday in a Bloomberg Radio interview. He cited
the pending introduction of the next iPhone model, known as the
iPhone 5, which he expects in October. “We’re going to see a
significant rebound in the December quarter, and that’s probably
an understatement,” he said.